The Morning Call
5/15/26
The
Market
Technical
Thursday in the
charts.
Summary:
A series of positive headlines from Beijing (and CSCO's outlook
hike) supported the AI/Semis-engine driving stocks higher again (also
helped by solid retail sales/claims). Oil ended higher (as
Hormuz flow remains muted). Bitcoin followed along with an aggressive bid
as silver and gold slipped lower. The dollar was bid but bonds
were dumped late in the day. It was a correlation-one day
once again with oil down, yields down, stocks up all in sync until the
US equity cash market opened (and stocks decoupled higher again)... while AI and semis remain the market's upside engine,
crowded positioning after historic gains makes future payoffs less assured. As Bloomberg's Michael Ball
points out, investors who want to stay long have increasing incentives to sell
historically rich calls to help fund protection against any cooling in
momentum. In a perfect scenario, SpotGamma says that NVDA
would release a final surge, which would place metrics like COR1M into the
fully-overbought signal.
Thursday in the
technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
How to trade this
upside squeeze.
Summary:
"In the period Monday open to Wednesday close the SPX has gained
45.32pts, a move entirely attributable to the Magnificent 7, which contributed
+47.34pts — meaning the remaining ~495 constituents subtracted a net 2pts in
aggregate." , last night Goldman's derivatives team had a simpler trade
idea: the "desk likes outright puts here given how flat skew is,
as well as upside in single names in the ADR space."
The downside no
longer matters.
https://www.zerohedge.com/the-market-ear/downside-no-longer-matters
Summary:
The upside panic continues accelerating while downside protection collapses
beneath the surface. Investors are increasingly chasing upside exposure at the
exact same time tail-risk hedging, skew, and put demand are all getting
aggressively repriced lower. The market is starting to behave like downside
risk no longer matters.
Bonds are screaming ‘something is wrong’.
(3)
Bonds Are Screaming "Something's Wrong"
One technician’s
take on gold, silver and copper.
Friday morning
setup: Bond yields, oil and the dollar are surging this morning as US
futures tumble from all-time highs, with Tech underperforming driven by a
series of factors including i) surging energy prices on lack of Iran war
progress, ii) elevated positioning into options expiry; iii) Central bank
repricing, iv) Tech sell-off driven by higher yields, and v) strikes at Samsung
Electronics. The combination of stronger consumption and higher inflation is
also a factor today. As of 8:00am ET, S&P futures are down 1.0% and Nasdaq
futures slide 1.4% with the momentum brigade of Semis and Memory dumping (that
bastion of the memory trade, Korea, sold off last night, its worst day since
early March). The losses point to a bleak end to a week in
which chipmakers led a narrow rally despite steadily rising yields
and the absence of a US-Iran deal. Cyclicals ex-Energy are, unsurprisingly,
seeing material underperformance to Defensives. Bond yields are up 4-7bps as
the Dollar looks to complete its first 5-day win streak since March. In
commodities, Energy is leading with Brent rising 2.3% to above $108 a
barrel. Helima Croft, global head of commodity strategy at RBC Capital
Markets, said an expectation that the Strait of Hormuz would reopen within the
next month was “magical thinking.” Precious metals tumble on dollar strength.
Today’s macro data releases are all B-grade, including Empire Mfg, Industrial /
Mfg Production, and Capacity Utilization; none are market-moving.
Fundamental
Headlines
The
Economy
US
The
May NY Fed manufacturing index was reported at 19.6 versus expectations of 7.5.
International
April
YoY Japanese machine tool orders increased 45.1% versus estimates of +28.1%; April PPI was up 2.3% versus +0.7%.
Other
Consumers switching to ‘wait and see’ mode.
https://bonddad.blogspot.com/2026/05/april-retail-sales-consumers-may-be.html
Overnight
News
US President
Donald Trump left China on Friday with no major breakthroughs on trade or
tangible help from Beijing to end the Iran war, despite two days spent heaping
praise on his host, Xi Jinping
Fiscal
Policy
America’s
new debt milestone.
https://lawliberty.org/americas-new-debt-milestone/?mc_cid=98c3923580
Government finances are not ready for a recession
(and neither are stocks).
https://www.apollo.com/wealth/the-daily-spark/us-government-finances-are-not-ready-for-a-recession
The 2026 edition of Citizens against Government
Waste Pigbook.
Inflation
Inflation is elevated no matter how you slice
it.
Inflation is coming back.
AI
AI exposes massive hidden software problem.
Affordability
Update on new home affordability.
https://politicalcalculations.blogspot.com/2026/05/new-homes-continue-trend-of-improving.html
China
The
Thucydides test and why Xi raised the issue.
Investing
Four financial
tasks that you shouldn’t put off.
https://www.morningstar.com/personal-finance/4-financial-jobs-you-shouldnt-put-off
The risk premium in Treasuries continues to rise.
https://www.capitalspectator.com/treasury-premium-climbs-again-fueled-by-sticky-inflation/
Advice from
TraderFeed that applies as equality to investors as it does to traders:
In her book on how children handle loss and grief, Dr.
Corinne Masur makes an important point. During a time of upheaval and loss of
an anchor in life, it's important to "keep rules and routines as
consistent as possible" (p. 173). Loss brings a psychological sense of
instability. Grounding life in consistency helps bring stability to the
difficult life period.
This is rarely
acknowledged in trading psychology, but the same principles hold. If traders
go for significant gains in markets, they will occasionally experience
significant losses. Sharpe Ratios for the usual directional trading ensure
that the magnitude of losses will be correlated with the magnitude of the gains.
As emphasized
below, what motivates traders is not just money, but a dream of success. When
those large losses occur, the dream is threatened. Stability is lost. How can
traders deal with such upheaval? We rarely read of this challenge.
For the trader, as
for the child, the best coping comes from doubling down on routine and the
familiar processes that have brought past success. This not only brings a
sense of stability but also helps prepare the trader for the eventual comeback.
It is tempting to want to make the money back all at once, but such overtrading
can only lead to further losses and emotional injury.
We often hear of
the importance of remaining process driven in trading. Yes, this grounds us in
our best practices, but it also grounds us emotionally when our large bets
result in large losses.
News on Stocks in Our Portfolios
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The
hidden mistake in every forecasting failure.
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